Internalization theory: An unfinished agenda |
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| Institution: | 1. Centre for Institutional Performance, Department of Economics, University of Reading, P.O. Box 218, Reading RG6 6AA, UK;2. School of Management, University of Bath, Bath, BA2 7AY, UK;1. Aarhus University, Fuglesangs Allé 4, DK 8210 Aarhus V, Denmark;2. University of South Florida, 4202 E. Fowler Ave., Tampa, FL 33620-5500, United States;3. Nykredit Realkredit A/S, Kalvebod Brygge 1-3, DK 1780 Copenhagen V, Denmark;4. Kids Retail of Denmark, Frederiksholms Kanal 4 st.th., DK 1220 Copenhagen K, Denmark;1. School of Mechanical Engineering, Tongji University, Shanghai 201804, China;2. LiuGong Machinery Co., Ltd., Guangxi 530000, China;1. Graduate School of Business Administration, University of Puerto Rico, Main Campus, Plaza Universitaria, North Tower, San Juan, PR 00931 3332, USA;2. GH Raisoni College of Engineering, Nagpur, India;1. The University of Adelaide Business School, 10 Pulteney St., Level 10, Adelaide, SA 5005, Australia;2. Kedge Business School, 680 cours de la Liberation, Talence Cedex, France |
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| Abstract: | Internalization theory is usually applied at the firm level to analyse FDI, licensing and subcontracting. This paper extends it to the industry level. It synthesises internalization theory and oligopoly theory. It analyses a global industry where firms innovate competitively, and freely enter and exit the industry. It presents a formal model which highlights the inter-dependencies between rival firms. Each firm responds to its rivals by jointly optimising production and innovation through inter-dependent ownership and location decisions. The competitive outcome determines which firms serve which markets, which firms enter or exit the industry, and the internalization strategy of each firm. |
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| Keywords: | Internalization Industry Competition Price Innovation Ownership |
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